RAREX LIMITED — Interim / Quarterly Report 2008

Sep 10, 2008

CLANCY EXPLORATION LIMITED

ABN: 65 105 578 756 AND CONTROLLED ENTITY

HALF YEAR ENDED 30 JUNE 2008

CORPORATE DIRECTORY

DIRECTORS

Dr James Macdonald Non-Executive Chairman

Mr Mark Stewart Managing Director

Dr Nick Archibald Non-Executive Director (Technical)

Mr Mark Lester Non-Executive Director (Financial)

COMPANY SECRETARY

Mr Rowan Caren

REGISTERED OFFICE

1st Floor 57 Havelock Street West Perth, WA 6005 Western Australia

Telephone: (08) 9481 8241 Facsimile: (08) 9226 1266 Website: www.clancyexploration.com

PRINCIPAL PLACE OF BUSINESS

1st Floor 57 Havelock Street West Perth, WA 6005 Western Australia

Telephone: (08) 9481 8241 Facsimile: (08) 9226 1266 Website: www.clancyexploration.com

LAWYERS

Holborn Lenhoff Massey 3rd Floor, Irwin Chambers 16 Irwin Street Perth 6000 Western Australia

Pullinger Readhead Lucas 50 Kings Park Road West Perth, WA 6005 Western Australia

BANKERS

National Australia Bank

AUDITOR

PKF Chartered Accountants & Business Advisers Level 7, BGC Centre 28 The Esplanade Perth, WA 6000 Western Australia

SHARE REGISTRY

Computershare Investor Services Pty Ltd Level 2, Reserve Bank Building 45 St Georges Terrace Perth, WA 6000 Western Australia

Telephone: +61 8 9323 2000 Facsimile: +61 8 9323 2033

DIRECTORS' REPORT FOR THE HALF YEAR ENDED 30 JUNE 2008

The Board of Directors has pleasure in presenting their report on the consolidated entity for the half-year ended 30 June 2008.

1. Directors

Dr A J Macdonald, Mr M R Stewart, Dr N J Archibald and Mr M A Lester held office during the whole of the half-year and until the date of this report.

Review of Operations $2.$

The consolidated entity continued to explore its portfolio of exploration properties during the half-year.

FINANCIAL RESULTS 3.

A summary of consolidated revenues and results for the half-year ended 30 June 2008 is set out below:

	2008	2007
	S	\$
Revenue	402,581	25,210
Expenses	1,535,323	294,826
Loss from continuing operations before income tax benefit/
(expense)	(1, 132, 742)	(269, 616)
Income tax benefit/(expense)	(60, 236)	27,054
Loss from continuing operations after income tax benefit/ (expense)	(1, 192, 978)	(242, 562)
Loss attributable to members of Clancy Exploration Limited	(1, 192, 978)	(242,562)

5. AUDITORS' INDEPENDENCE DECLARATION UNDER SECTION 307C OF THE CORPORATIONS ACT 2001

The auditors' independence declaration is set out on page 2 and forms part of the directors' report for the half year ended 30 June 2008.

This report is made in accordance with a resolution of the directors.

$M·l.$

M R Stewart MANAGING DIRECTOR

Signed at Perth this 10^th day of September 2008.

AUDITOR'S INDEPENDENCE DECLARATION

As lead auditor for the review of Clancy Exploration Limited for the half year ended 30 June 2008, I declare that, to the best of my knowledge and belief, there have been:

• $(a)$ no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the review; and
• $(b)$ no contraventions of any applicable code of professional conduct in relation to the review.

PKF Chartered Accountants

Neil Smith Partner

Dated at Perth, Western Australia this 10^th day of September 2008.

Tel: 61 8 9278 2222 | Fax: 61 8 9278 2200 | www.pkf.com.au West Australian Partnership | ABN 39 542 778 278 Level 7, BGC Centre | 28 The Esplanade | Perth | Western Australia 6000 | Australia PO Box Z5066 | St Georges Terrace | Perth | Western Australia 6831

PKF is a national association of independent chartered accounting and consulting firms, each trading as PKF. PKF Australia Ltd is also a member of PKF International, an association of legally independent chartered accounting and consulting firms.

CONDENSED INCOME STATEMENT FOR THE HALF YEAR ENDED 30 JUNE 2008

		Consolidated
		30.06.2008	30.06.2007
	Notes	\$	\$
Continuing operations
Rendering of services		279,511	24,894
Net joint venture reimbursed exploration expenditure	3(b)	6,545
Other revenue	2	116,525	316
Revenue		402,581	25,210
Employee benefits expense		(584, 347)	(29, 626)
Consulting and outsourced services expense		(244, 237)	(133, 230)
Exploration expenditure	3(b)	(488, 770)	(117, 283)
Computer related costs		(17, 865)	(300)
Travel expense		(14, 575)	(8,681)
Occupancy costs		(17, 234)
Equipment insurance and hire expense		(11,006)	(1,217)
Marketing expense		(8,700)
Depreciation, amortisation and impairment expense	3(a)	(117, 170)
Finance costs			(12)
Other expenses		(31, 419)	(4, 477)
Total expenses		(1,535,323)	(294, 826)
Loss before income tax benefit/(expense)		(1, 132, 742)	(269, 616)
Income tax benefit/(expense)		(60, 236)	27,054
Loss attributable to members of the parent		(1, 192, 978)	(242, 562)
Basic loss per share		$(2.5)$ cents	$(1.5)$ cents
Diluted loss per share		$(2.5)$ cents	$(1.5)$ cents

The above Condensed Income Statement is to be read in conjunction with the accompanying notes.

CONDENSED BALANCE SHEET AS AT 30 JUNE 2008

		Consolidated
		30.06.2008	31.12.2007
	Notes	\$	\$
ASSETS
Current Assets
Cash and cash equivalents Trade and other receivables	4	3,572,321	3,767,671
Available-for-sale investment		162,502	169,321
		200,225	401,013
Total Current Assets		3,935,048	4,338,005
Non-current Assets
Other financial assets
Plant and equipment		116,280	77,119
Intangible assets		27,445	19,523
Total Non-current Assets		143,725	96,642
TOTAL ASSETS		4,078,773	4,434,647
LIABILITIES
Current Liabilities
Trade and other payables		1,231,624	433,731
Provisions		22,788	10,472
Total Current Liabilities		1,254,412	444,203
TOTAL LIABILITIES		1,254,412	444,203
NET ASSETS		2,824,361	3,990,444
EQUITY
Contributed equity	5	4,722,292	4,722,292
Reserves	6	248,115	221,220
Accumulated losses		(2, 146, 046)	(953,068)
TOTAL EQUITY		2,824,361	3,990,444

The above Condensed Balance Sheet is to be read in conjunction with the accompanying notes.

CONDENSED STATEMENT OF RECOGNISED INCOME AND EXPENSE FOR THE HALF-YEAR ENDED 30 JUNE 2008

	Consolidated
		30.06.2008 30.06.2007
	Notes	\$	\$
Net fair value gain on revaluation of available-for-sale investment			90,179
Net fair value loss on revaluation of available-for-sale investment		(57, 962)
Income tax on items taken directly to or transferred from equity		17,389	(27, 054)
Net income/(loss) recognised directly in equity		(40, 573)	63,125
Loss for the period		(1, 192, 978)	(242, 562)
Total recognised expense for the period attributable to parent		(1,233,551)	(179, 437)

CONDENSED CASH FLOW STATEMENT FOR THE HALF YEAR ENDED 30 JUNE 2008

		Consolidated 30.06.2008 30.06.2007
	Notes	\$	\$
CASH FLOWS USED IN OPERATING ACTIVITIES
Receipts from customers		1,832,165	531,186
Payments to/(refunds from) suppliers and employees		(2,078,023)	118,445
Interest received		116,525	170
Interest paid			(12)
NET CASH FLOWS USED IN OPERATING
ACTIVITIES		(129, 333)	649,790
CASH FLOWS USED IN INVESTING ACTIVITIES
Purchase of plant and equipment		(51, 391)
Purchase of intangible assets		(12, 885)
NET CASH FLOWS USED IN INVESTING ACTIVITIES		(64, 276)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from share issue			5,000,000
Costs of share issue			(720, 404)
Loans to related entity - repayments received		3,310
Loans to related entity - payments made		(5,051)
Proceeds from borrowings - related entity			450,735
NET CASH FLOWS FROM FINANCING ACTIVITIES		(1,741)	4,730,331
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS		(195, 350)	5,380,120
Cash and cash equivalents at beginning of period		3,767,671	1,345
CASH AND CASH EQUIVALENTS AT END OF PERIOD	4	3,572,321	5,381,465

The above Condensed Cash Flow Statement is to be read in conjunction with the accompanying notes.

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 30 JUNE 2008

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES $\mathbf{1}$

Basis of preparation

This general purpose condensed financial report for the half-year ended 30 June 2008 has been prepared in accordance with Accounting Standard AASB 134: Interim Financial Reporting and the Corporations Act 2001.

The half-year financial report does not include all the notes of the type normally included within the annual financial report and therefore cannot be expected to provide as full an understanding of the financial performance, financial position and financing and investing activities of the consolidated entity as the full financial report.

It is recommended that this half-year financial report be read in conjunction with the annual report for the year ended 31 December 2007 and considered together with any public announcements made by Clancy Exploration Limited during the half-year ended 30 June 2008 in accordance with the continuous disclosure requirements of the Corporations Act 2001.

The half-year consolidated financial statements have been prepared using the same accounting policies as used in the annual financial statements for the year ended 31 December 2007. In the half year ended 30 June 2008, the consolidated entity has reviewed all of the new and revised standards and interpretations issued by the AASB that are relevant to its operations and effective for annual reporting periods beginning on or after 1 January 2008. It has been determined by the consolidated entity that these is no impact, material or otherwise, of the new or revised standards and interpretations on its business and, therefore, no change to the consolidated accounting policy.

Reporting Basis and Conventions

The half-year financial report has been prepared on an accruals basis and is based on historical costs except where stated.

Segment Reporting

A geographical segment is a distinguishable component of the entity that is engaged in providing products or services within a particular economic environment and is subject to risks and returns that are different from those of segments operating in other economic environments. The company operates in a single business segment, in one geographical location. The operations of the consolidated entity consist of gold and copper exploration and development, within Australia. Accordingly, no segment information is presented in this half-year financial report.

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 30 JUNE 2008

			Consolidated
			2008	2007
		Notes	\$	\$
2.	OTHER REVENUE
	Interest received		116,525	316
			116,525	316
З.	EXPENSES
	(a) Depreciation, amortisation and impairment included in income statement
	Impairment of available-for-sale investment		142,826
	Less: Deferred income tax expense - temporary difference attributable to impairment of
	available-for-sale investment at statutory income
	tax rate of 30%		(42, 848)
	Depreciation of plant & equipment		12,229
	Amortisation of software		4,963
			117,170
	(b) Exploration expenditure
	Gross direct exploration expenditure
	- Self funded projects (including depreciation)		493,012	117,283
	- Joint venture projects (including depreciation)		870,905	259,313
	Total gross exploration expenditure		1,363,917	376,595
	Less: Expenditure reimbursed by joint venture
	partner		(873, 015)	(259, 313)
	Less: Depreciation classified separately in
	income statement		(8,677)
	Net disclosure variously in income statement		482,225	117,283
4.	CASH AND CASH EQUIVALENTS
	Cash at bank		16,590	15,065
	Short term bank deposits		3,555,631	3,752,606
	Cash on hand		100
			3,572,321	3,767,671

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 30 JUNE 2008

			Consolidated
			30.06.2008	30.06.2007
		Notes	\$	\$
5.	CONTRIBUTED EQUITY
	Ordinary shares	(a)	4,722,292	570,553
	(a) Ordinary shares
	Issued and fully paid		4,722,292	570,553

Fully paid ordinary shares carry one vote per share and carry the right to dividends

		30.06.2008 Number of shares	\$	30.06.2007 Number of shares	\$
Movement in ordinary shares on issue
Beginning of financial year		47,805,506	4,722,292	120,000
Add: Division of capital by 100:1	(i)			11,880,000
Conversion of debt to equity	(i)			3,400,000	290,000
Shares issued for acquisition of subsidiary	(iii)			4,600,000
Shares issued on acquisition of shares and options in Bass Metals Limited	(iv)			2,805,506	280,551
End of half-year		47,805,506	4,722,292	22,805,506	570,553

(i) On 9 March 2007 each share in the capital of the company was divided into 100 shares in its capital.

(ii) On 7 March 2007 and 8 May 2007 2,600,000 and 800,000 shares were issued respectively to the then parent entity Geoinformatics Exploration Australia Pty Ltd ("GEA") in partial satisfaction of an inter-company loan arising from services provided and expenditure incurred from 1 January 2007 to 30 April 2007.

(iii) On 8 May 2007, 4,600,000 shares were issued to GEA as consideration for the acquisition of the entire issued share capital of Geoinformatics Exploration Tasmania Pty Ltd ("GET"). The transaction has been accounted for at fair value of \$460,000 by the parent entity. At the time of this acquisition both the parent entity and GET were under the common control of GEA and the combination was accounted for using the pooling of interests method. On consolidation, the difference of \$459,999 between the consideration paid of \$460,000 and the net assets acquired of \$1 is taken to equity in the consolidated entity.

$\overline{9}$

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 30 JUNE 2008

CONTRIBUTED EQUITY (Continued) 5.

Movement in ordinary shares on issue (Continued)

(iv) On 8 May 2007, 2,643,750 shares and a further 161,756 shares were issued respectively to GEA as consideration for the acquistion of 911,250 shares and separately 250,000 unlisted options and 56.250 listed options, in Bass Metals Limited.

(v) The transaction costs represent the cost of issuing shares pursuant to the prospectus as per point (vi) below.

(vi) The Company issued a prospectus dated 22 May 2007, with an initial public offering of 25,000,000 ordinary shares at a subscription price of 20 cents per share. The offering was successfully completed on 2 July 2007, raising \$5,000,000 before costs of the issue. The Company's shares were officially listed on the Australian Securities Exchange on 11 July 2007. Application monies received up until 30 June 2007 were accounted for as a liability to applicants. As at 30 June 2007 costs of \$720,404 had been incurred in relation to the issue and were accounted for as prepayments, prior to capitalisation.

			Consolidated
			30.06.2008	30.06.2007
		Notes	\$	\$
6.	RESERVES
	Available-for-sale investments revaluation reserve
	Share-based payment reserve		248,115
			248,115
	(a) Movement in reserves
	(i) Available-for-sale investments revaluation reserve
	Balance at beginning of the financial year		40,573
	Net unrealised gain/(loss) on available-for-sale investment before tax		(57, 961)	90,179
	Tax effect of net gain on available-for-sale investment		17,388	(27,054)
	Balance at the end of the financial year			63,125

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 30 JUNE 2008

RESERVES (Continued) 6.

(a) Movement in reserves (continued)

	Consolidated
Notes	30.06.2008 \$	30.06.2007 \$
(ii) Share-based payment reserve
Balance at beginning of the financial year	180,647
On 23 April 2007 2,600,000 options and on 2 November
2007 300,000 options, were granted to directors, staff and consultants, subject to a 2 year escrow from the 11
July 2007 date of listing and an expiry date of 30 April
2010. They have been valued according to the binomial
tree method and are being expensed proportionately over their 2 year vesting period, commencing 11 July
2007.	67,147
On 13 May 2008 100,000 options were granted to a
staff member, subject to an escrow from grant date to 11 July 2009 and an expiry date of 30 April 2010. They
have been valued at \$2,750 according to the binomial
tree method with an exercise price of 20 cents when the
market trading price was 13 cents, a volatility factor of 65% and a risk free rate of 6.87%. They are being
expensed proportionately over their vesting period.	321
Balance at the half-year end	248,115

(b) Nature and purpose of reserves

The available-for-sale investments revaluation reserve records increments and decrements in fair value to the extent that they offset one another.

The share-based payments reserve records the value of share options issued to the Company's employees.

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 30 JUNE 2008

COMMITMENTS AND CONTINGENCIES 7.

			Consolidated
			2008	2007
			\$	\$
The only changes to the commitments and contingencies disclosed in the most recent annual financial report are specified below:
Exploration Expenditure Commitments:
Under 17 (30.06.2007:14) exploration licences Payable	NSW	Government
- not later than one year			71,815	118,978

• later than one year and not later than five years 240,000 152,034

271,012

311,815

In respect of the expenditure commitments relating to 6 of the 17 NSW Government exploration licences, an amount of \$31,759 (30.06.2007: 14 NSW exploration licences -\$31,147) is recoverable from Gold Fields Australasia Pty Ltd under alliance and joint venture agreements. At the time of this report, 1 application for renewal of an exploration licence and 3 new applications for exploration licences, have been made. It is currently not possible to quantify the amount of any commitments that may arise, in the event these applications for renewal are successful.

8. SUBSEQUENT EVENTS

There were no events subsequent to the end of the financial period that would have a material effect on this half year financial report.

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 30 JUNE 2008

DIRECTORS' DECLARATION

In accordance with a resolution of the directors of Clancy Exploration Limited, we state that:

In the opinion of the Directors:

• the financial statement and notes set out on pages 3 to 12 are in accordance with the $(a)$ Corporations Act 2001, including:
• giving a true and fair view of the consolidated entity's financial position as at 30 $(i)$ June 2008 and of its performance for the half-year ended on that date; and
• complying with Accounting Standard AASB 134 Interim Financial Reporting $(ii)$ and the Corporations Regulations 2001; and
• there are reasonable grounds to believe that the company will be able to pay its $(b)$ debts as and when they become due and payable.

On behalf of the Board,

$1 - 1.5$

M R Stewart Director

M A Lester Director

Dated at Perth, this 10th day of September 2008

INDEPENDENT AUDITOR'S REVIEW REPORT

TO THE MEMBERS OF CLANCY EXPLORATION LIMITED

Report on the Half-Year Financial Report

We have reviewed the accompanying half-year financial report of Clancy Exploration Limited which comprises the condensed balance sheet as at 30 June 2008, the condensed income statement, condensed statement of recognised income and expense and condensed cash flow statement for the half-year ended on that date, a statement of accounting policies, other selected explanatory notes and the directors' declaration of the consolidated entity. The consolidated entity comprises the company and the entities it controlled at 30 June 2008 or from time to time during the half year ended on that date.

Directors' Responsibility for the Half-Year Financial Report

The directors of the company are responsible for the preparation and fair presentation of the half-year financial report in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001. This responsibility includes establishing and maintaining internal control relevant to the preparation and fair presentation of the half-year financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditor's Responsibility

Our responsibility is to express a conclusion on the half-year financial report based on our review. We conducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of an Interim Financial Report Performed by the Independent Auditor of the Entity, in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the financial report is not in accordance with the Corporations Act 2001 including: giving a true and fair view of the consolidated entity's financial position as at 30 June 2008 and its performance for the half-year ended on that date; and complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Act 2001. As the auditor of Clancy Exploration Limited, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report.

A review of a half-year financial report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Independence

In conducting our review, we have complied with the independence requirements of the Corporations Act 2001.

Tel: 61 8 9278 2222 | Fax: 61 8 9278 2200 | www.pkf.com.au West Australian Partnership | ABN 39 542 778 278 Level 7, BGC Centre | 28 The Esplanade | Perth | Western Australia 6000 | Australia PO Box Z5066 | St Georges Terrace | Perth | Western Australia 6831

PKF is a national association of independent chartered accounting and consulting firms, each trading as PKF. PKF Australia Ltd is also a member of PKF International, an association of legally independent chartered accounting and consulting firms.

Conclusion

Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the half-year financial report of Clancy Exploration Limited is not in accordance with the Corporations Act 2001 including:

• (a) giving a true and fair view of the consolidated entity's financial position as at 30 June 2008 and of its performance for the half-year ended on that date; and
• (b) complying with Accounting Standard AASB 134 Interim Financial Reporting and Corporations Regulations 2001.

PKF Chartered Accountants

Neil Smith

Partner

Dated at Perth, Western Australia this 10^th day of September 2008.